Category Archives: Compensation

The Fair Labor Standards Act: Continuing Issues in the Debate

Source: William G. Whittaker, Congressional Research Service, Order Code RL34510, May 28, 2008

On May 25, 2007, the President signed into law changes in the minimum wage under the Fair Labor Standards Act (FLSA): P.L. 110-28. Although the wage issue may now have been momentary settled, the act includes other provisions that have been subject to legislation through the years and may again become the focus of legislative consideration. Examples include the following issues.

• A youth sub-minimum wage, instituted in 1996, was not included in the 2007 amendments, and is $4.25 per hour.
• The cash wage employers of ‘tipped employees’ must pay, last updated in 1996, is $2.13 per hour.
• In 1989, the ‘small business exemption’ was restructured to exempt from minimum wage requirements qualifying firms with an income of under $500,000; but, as administered, exemptions have only been available for employees not involved in interstate commerce.
• In 2001, the Clinton Administration proposed restructuring of the ‘companionship exemption’ under the FLSA; in 2002, the measure was withdrawn. The issue has recently been the subject of a Supreme Court ruling (2007) and of proposed legislation (H.R. 3582 and S. 2061).
• Through nearly a century, some economists (and, later, some Members of Congress) have proposed, in various formats, indexation of the federal minimum wage — an issue that still sometimes arises.
• In 1986, Section 14(c) of the act was amended to remove any specific minimum wage floor for handicapped workers, replacing it with a negotiated wage ‘commensurate’ with the worker’s productivity. It has been contested through the years.
• In 2003, a proposal was issued dealing with overtime pay for persons classified as ‘executive, administrative, or professional’ employees under Section 13(a)(1) of the act. At that time, the issue was extremely contentious. How has it worked out in practice?
• Industry has threatened to leave American Samoa and the Commonwealth of the Northern Mariana Islands were the full FLSA to be made applicable there, as it would be under P.L. 110-28. What will be the impact upon those islands?
• Increasingly, the states (now 34 in number) have moved to provide minimum wage rates higher than the federal rate. What implications can be expected, both in economic and political terms?

This report will be updated as the need may arise

15 of the Most Astonishing Retirements, Bonuses and Cash-Outs in Corporate America

Source: HR World Editors, June 17, 2008

While athletes’ contracts grab all the headlines, they can’t hold a candle to the most legendary corporate cash-outs, retirements, and bonuses. Here are 15 of the most astonishing retirement packages, severance payouts and bonuses that corporate America has ever seen.

Prevailing Wages and Government Contracting Costs – A review of the research

Source: Nooshin Mahalia, Economic Policy Institute, Briefing Paper #215, July 8, 2008

From the press release:
Many state and local governments, for more than a century, have required private contractors on public works projects to pay wages and benefits on par with what is commonly paid to construction workers in the area. The federal government followed suit in 1931 with passage of the Davis-Bacon Act. The Act requires contractors to pay the prevailing wage, defined as the wage rate paid to at least 50% of workers in the industry in that area or, if no wage rate reaches the 50% mark, the industry average for the area.

The EPI report, “Prevailing Wages and Government Contracting Costs” by economic analyst Nooshin Mahalia, finds that the studies that prevailing wage opponents cite contain a critical flaw that makes their findings unreliable. They are based on hypothetical models which assume as a starting point that higher wages will necessarily raise contract costs, rather than testing whether, in practice, there is a relationship between wages and contract costs. Mahalia’s analysis shows that most researchers have found that prevailing wage regulations in practice do not increase government contracting costs.

Recent Trends in the Variability of Individual Earnings and Household Income

Source: Congressional Budget Office, Pub no. 2996, June 2008

Changes in earnings and income are characteristic of a dynamic labor market, as people change jobs or careers, move between part-time and full-time work, or start or stop working.

Having that flexibility in the labor market is generally considered a source of strength of the U.S. economy overall. Nonetheless, that variability causes true economic hardship for some people.

This Congressional Budget Office (CBO) paper uses administrative and survey data to examine year-to-year changes in individual earnings and household income since 1984. It also examines variability in earnings and income by factors such as age, sex, and education.

The Wages of Exclusion: Low-Wage Work and Inequality

Source: Heather Boushey and Shawn Fremstad, New Labor Forum, Vol. 17, Issue 2, Summer 2008

In the United States, low-wage work is commonly defined by referencing the federal poverty line. According to this definition, a low-wage job is one that paid less than $9.83 an hour in 2006. Yet, there is near-unanimous consensus among researchers and policy advocates that the poverty line is a deply flawed measure. Reflecting this consensus, economist Rebecca Blank recently wrote: “It is not too strong a statement to say that, forty-three years after they were developed, the poverty thresholds are nonsensical numbers.” … In this article, we look to establish firmer foundations than the poverty line to define low-wage work.

Are Union Wage Differentials in the United States Falling?

Source: Mckinley L. Blackburn, Industrial Relations, Volume 47 Issue 3, July 2008
(subscription required)

From the abstract:
This paper addresses several estimation and specification issues in estimating union wage differentials in the United States over the last two decades. Estimates provide strong evidence of a decline in the differential for women. For men, the differential appears to have declined for a person with overall average characteristics, but not for a male with characteristics of the average unionized male.

The Great Divergence: Real-Wage Growth of All Workers Versus Finance Workers

Source: Andrew Sum and Paulo Tobar with Joseph McLaughlin and Sheila Palma
Challenge, May-June 2008

In case you wondered whether workers in securities firms and investment bankers have fared better than the rest of American workers, the answer is, resoundingly, “Yes.” Andrew Sum and his colleagues here present the most comprehensive evidence so far. It is eye-opening.

Typical full-time wage and salary workers in the United States achieved no increase in their weekly earnings over the 2002-2007 period. They gained no economic ground despite rising labor productivity and increasing aggregate employment opportunities over most of this five-year period. Second, the mean weekly earnings of the nation’s production or nonsupervisory workers rose by only $6 over this five-year period, barely enough to buy a premium six-pack of beer in most states or a grande latte and a scone at Starbucks.

The mean weekly earnings of workers in the nation’s investment banking and securities industries rose by $2,408 between the first quarters of 2002 and 2007, four hundred times higher than the mean weekly earnings gains of the nation’s 110 million frontline workers. The mean weekly earnings (including bonuses) of wage and salary workers in the investment banking and securities industries of Manhattan rose by $8,028 over the 2002 I-2007 I period. This mean weekly wage gain for Wall Street workers was 134 times higher than the mean weekly wage gain for all U.S. wage and salary workers, including executives, and 1,338 times higher than the mean weekly wage gain for all frontline workers in U.S. industries over this five-year period.

The Economic State of Young America

Source: Tamara Draut, Dēmos, Spring 2008

From the press release:
Today’s young adults are feeling the impact of a massive shift in the U.S. economy–changes that are documented in a new data report from Demos and an analysis of public opinion polling by The Center for American Progress.

The Demos report, “The Economic State of Young America,” is a comprehensive databook offering proof that a combination of declining incomes, growing debt, and high costs of education, homeownership and healthcare are conspiring to make this generation the first to not surpass the living standards of their parents.
The Progressive Generation: How Young Adults Think About the Economy
Center for American Progress

The Union Wage Advantage for Low-Wage Workers

Source: John Schmitt, Center for Economic and Policy Research, May 2008

From the summary:
A new report from CEPR shows that union membership increases the wages of all workers, with low-wage workers seeing the largest gains.

This report uses national data from 2003 to 2007 to show that unionization raises the wages of the typical low-wage worker (one in the 10th percentile) by 20.6 percent compared to 13.7 percent for the typical medium wage worker (one in the 50th percentile), 6.1 percent for the typical high-wage worker (one in the 90th percentile). The paper also produces results for the 50 states and the District of Columbia. Throughout the states, a similar pattern holds, with unionization raising the wages of the lowest-wage workers the most.

See also:
Press release

Squeezed: How Costs for Insuring Families are Outpacing Income – A State-By-State Analysis

Source: State Health Access Data Assistance Center, University of Minnesota, April 2008

From the summary:
This article reveals how the cost of family health insurance nationwide is increasing dramatically for employees without anywhere near an equivalent increase in family income. If this trend continues, more workers are likely to become uninsured because of the expense.

Key Findings:

  • The amount workers pay for family coverage nationwide has increased by 30 percent from $8,281 in 2001 to $10,728 in 2005.
  • Employee income has increased by only 3 percent in the same time period.
  • The average cost employers pay for their share of family coverage has increased by 28 percent from $6,360 to $8,143.

Seventy-six percent of insured individuals in the United States receive health insurance from their own or a family member’s employer. It follows that the more employees and employers have to pay for that insurance, the more likely workers are to join the ranks of the uninsured. Risa Lavizzo-Mourey, M.D., M.B.A, president and CEO of the Robert Wood Johnson Foundation stated in a press release, “This study makes plain what every working parent knows–that providing insurance coverage takes a bigger bite from the family budget every year.”